Corporate Social Responsibility: Industrial and social symbiosis
Social fabric is the world's gross natural product, and all industries must contribute to its production to keep their own value chains strong.
By Corinne Kator, Associate Editor -- Modern Materials Handling, 9/1/2008
Pharmaceutical giant merck has teamed up with the Chinese Ministry of Health to combat HIV/AIDS in China. Telephone service provider T-Mobile donates money and employee time to after-school programs for at-risk kids. Aveda, a supplier of beauty products, offsets 100% of its electricity use with purchases of wind energy.
In every industry today, companies are finding meaningful ways to contribute to the greater good. They recognize that without a vibrant society in which to work, a business enterprise will decay and die. The trend for industries to help strengthen their local communities has become so pervasive it now has an acronym: CSR (for corporate social responsibility).
Today's CSR programs often involve more than writing an annual check to the United Way. And as companies grow even more thoughtful and strategic about CSR initiatives, materials handling professionals may be called upon to contribute unique knowledge and skills.
The growing CSR movement
While U.S. corporations initially resisted calls to be more socially responsible—calls in the 1970s to curb pollution and calls in the 1980s to cease dealings with sweatshops in developing countries—most companies today are embracing CSR, says Mark Kramer, managing director of FSG Social Impact Advisors (617-357-4000, www.fsg-impact.org), a nonprofit consulting firm that helps companies develop effective CSR programs.
One of the reasons for this change, says Kramer, is that companies are developing strategic CSR plans that give them an edge over competitors.
“We've seen a pronounced shift in the last five years away from CSR as a cost and liability to CSR as a source of competitive advantage,” he says.
The grocery chain Whole Foods provides an excellent example. Whole Foods supports organic farming and humane treatment of animals, it's committed to reuse and recycling, it maintains high nutrition standards for the food it sells, and it donates 5% of its profits to charity. As a result, the chain has developed a loyal following of socially conscious consumers willing to pay a premium for Whole Foods products.
A company's CSR initiatives can be classified into two categories:
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those that involve running a business in socially responsible ways day to day, and
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philanthropic initiatives that involve donating resources to good causes.
The first category, says Kramer, weaves CSR into a company's value chain. The second category places CSR outside the value chain.
Both types of CSR initiatives are important in today's business environment. According to a recent study by brand consultants Cone LLC (617-227-2111, www.coneinc.com), 69% of Americans consider a company's business practices when deciding what to buy, and 87% are likely to switch from one product to another if the other product is associated with a good cause.
In addition to affecting sales, says the Cone LLC report, a business's CSR initiatives can affect public perception, recruiting and investment consideration.
CSR within the value chain
Companies used to try to sidestep tough issues of social responsibility by making token philanthropic donations, says Kramer. But today, he says, “clearly you find more effort and budget on value chain activities than on philanthropy.”
Food companies are paying more attention to the nutritional value of their products, he says, banks are educating customers about consumer debt and retailers are selling textiles certified to be free of child labor.
Today's most visible forms of value-chain CSR are centered on the environment. (See Quality Bicycle Products story on page 24.)
Environmental initiatives are already affecting materials handling professionals in a variety of ways: they're switching to reusable pallets, using less packing material, fully cubing out trailers to reduce fuel consumption and investing in energy efficient equipment, says Stephen Stokes, vice president for sustainability at AMR Research (617-542-6600, www.amrreasearch.com).
And that may be just the beginning, Stokes says. As companies make the shift to designing their products for easy recycling and reuse, for example, they'll have to improve their reverse logistics capabilities so they can recapture those products from customers.
CSR beyond the value chain
While value-chain CSR activities are getting a lot of attention these days, philanthropy is by no means dead, says Kramer. Savvy companies, he says, are using philanthropic activities to reinforce their value-chain activities.
They're also supporting charitable causes that relate to their core business because that's where their resources and expertise can do the most good. GE, for example, has donated medical equipment, water purification systems, power generators and thousands of hours of employee time to hospitals and health clinics in Ghana.
In addition to being deeply rewarding for employees, Kramer says, this project is more powerful than anything a nonprofit organization could accomplish with donated money. “Very few nonprofits have the clout, resources and efficiency of a company like GE,” he says.
Just as leaders at GE realized their knowledge and resources could improve healthcare in Ghana, America's supply chain professionals have realized their expertise can be invaluable during a national emergency.
Three years ago, the Council of Supply Chain Management Professionals (CSCMP), the Warehousing Education and Research Council (WERC) and several other industry associations formed the American Logistics Aid Network (ALAN).
The goal of the network, says ALAN president Jock Menzies, is to provide materials handling and logistics support for the Red Cross and other aid agencies in times of crisis. ALAN members, he says, can provide anything from consulting and advice to equipment, warehouse space and transportation.
ALAN officers work with relief agencies to create a Web portal where the agencies can enter requests for assistance, and ALAN members can reply with offers of help. Traditionally, says Menzies, companies and organizations have responded to disasters by making donations, and then aid agencies have done their best to make use of those donations. The Web portal will turn that model on its head, resulting in a more efficient “pull” system rather than a “push” system.
The Web portal is not quite ready for use, Menzies says, but ALAN members have already begun providing service in limited ways. During last year's devastating California wildfires, for example, a lift truck dealership that belongs to ALAN answered a request for pallet jacks. And when the Humane Society recently needed help moving equipment out of Louisiana, ALAN arranged transportation.
Of course, materials handling professionals don't need to wait for a wildfire or a hurricane to make philanthropic contributions. Recent work at Action Ministries in northern Kentucky is a perfect example.
The all-volunteer food pantry was having difficulty making efficient use of its donations, so leaders there asked Steve Parsley, a longtime volunteer, for help.
Parsley is an engineer with systems integrator Bastian Material Handling (800-837-3760, www.bastiansolutions.com). With the support of his employer, he and some colleagues drew up a plan to redesign Action Ministries' warehouse. They secured donations of pallet rack, wire decking, carton flow rack, gravity conveyor and reusable totes. Some of the equipment came new from materials handling suppliers and some came used from local companies.
With expertise and the donated equipment, says Parsley, they transformed Action Ministries' warehouse from “a building with a floor” to an efficient and professional DC complete with back storage, forward storage, pick faces and a basic inventory control system.
The food pantry is still looking for a better information system and a new lift truck, but the new system is already allowing Action Ministries to handle more donations than ever before.
“We could never have managed the amount of food we have now if we were just putting it on the floor like we were six months ago,” says Sandy Banta, a Action Ministries volunteer. And, she adds, the warehouse no longer looks like a “rinky dink” operation, giving donors confidence to make larger food contributions.
Parsley says his work with Action Ministries is proof that “with very little effort and very little cost, you can make a difference.”
It's also proof of Kramer's assertion that charitable work is most powerful when it harnesses the donor's specific experience and expertise.
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